Question: How do computer viruses, Trojan horses, and

> Oswald Optical, Inc., provides a full line of designer eyewear to optical dispensaries. Oswald reported the following information for 2016 and 2015: Compute return on assets (ROA) for 2016 and 2015. Using the DuPont model, identify the components and s

> In 2016, Amici, Inc., reported $800 million in sales, $33 million in net income, and average total assets of $300 million. What is Amici’s return on assets in 2016?

> For each of the following scenarios, indicate whether a long-term asset has been impaired (Y for yes and N for no) and, if so, the amount of the loss that should be recorded. Impaired? Amount (Y or N) Estimated Future Asset Book Value Cash Flows Fai

> Crunchies, Inc., dominates the snack-food industry with its Salty Chip brand. Assume that Crunchies, Inc., purchased Healthy Snacks, Inc., for $5.8 million cash. The market value of Healthy Snacks’ assets is $7 million, and Healthy Snacks has liabilities

> BB Petroleum, a giant oil company, holds reserves of oil and gas assets. At the end of 2016, assume the cost of BB Petroleum’s oil reserves totaled $208 billion, representing 16 billion barrels of oil in the ground. 1. Which depreciation method is simil

> On January 1, 2015, Global Manufacturing purchased a machine for $920,000 that it expected to have a useful life of five years. The company estimated that the residual value of the machine was $70,000. Global Manufacturing used the machine for two years

> Happy Times Amusement Park paid $180,000 for a concession stand. Happy Times started out depreciating the building using the straight-line method over ten years with zero residual value. After using the concession stand for three years, Happy Times deter

> Assume that on September 30, 2015, LuxAir, an international airline based in Germany, purchased a Jumbo aircraft at a cost of €42,500,000 (€ is the symbol for the euro). LuxAir expects the plane to remain useful for five years (5,000,000 miles) and to ha

> Lovell, Inc., purchased a used van for use in its business on January 1, 2015. It paid $13,000 for the van. Lovell expects the van to have a useful life of four years, with an estimated residual value of $1,000 at the end of the four years. Lovell expect

> Lovell, Inc., purchased a used van for use in its business on January 1, 2015. It paid $13,000 for the van. Lovell expects the van to have a useful life of four years, with an estimated residual value of $1,000 at the end of the four years. Lovell expect

> Examine the excerpt of a footnote from Red Rock’s September 30, 2016, annual report to follow. 1. What are Red Rock’s largest two categories of property and equipment as of September 30, 2016? Describe in general ter

> Using the LIFO method, calculate the cost of ending inventory and cost of goods sold for Cowell Corporation. A1 Quantity Unit Cost Total 1 2 Beginning inventory 3 Purchases 4 Goods available for sale 5 Ending inventory 6 Cost of goods sold 100 S 150

> Using the FIFO method, calculate the cost of ending inventory and cost of goods sold for Cowell Corporation. A1 Quantity Unit Cost Total 1 2 Beginning inventory 3 Purchases 4 Goods available for sale 5 Ending inventory 6 Cost of goods sold 100 S 150

> Using the average-cost method, calculate the cost of ending inventory and cost of goods sold for Cowell Corporation. A1 Quantity Unit Cost Total 1 2 Beginning inventory 3 Purchases 4 Goods available for sale 5 Ending inventory 6 Cost of goods sold 1

> Marley Corporation uses the LIFO method to account for inventory. Marley is having an unusually good year, with net income well above expectations. The company’s inventory costs are rising rapidly. What can Marley do immediately before the end of the yea

> McDonough Copy Center is a corporation subject to a 30% income tax. Compute McDonough Copy Center’s income tax expense under the average, FIFO, and LIFO inventory costing methods. Which method would you select to a. maximize income before tax and b. mi

> McDonough Copy Center sells laser printers and supplies. Assume McDonough Copy Center started the year with 100 containers of ink (average cost of $8.00 each, FIFO cost of $8.60 each, LIFO cost of $7.90 each). During the year, McDonough Copy Center purch

> Trinkets Unlimited made total purchases of $250,000 in the most current year. It paid freight in of $3,000 on its purchases. Freight out (the cost to deliver the merchandise to its customers) totaled $7,000. Of the total purchases, Trinkets Unlimited ret

> Rootstown Company sold 10,000 jars of its organic honey in the most current year for $8 per jar. The company had paid $3.50 per jar of honey. (Assume that sales returns are nonexistent.) Calculate the following: 1. Sales revenue 2. Cost of goods sold

> Here is the original schedule of cost of goods sold for Truman Company for the years of 2014 through 2017: During the preparation of its 2017 financial statements, Truman Company discovered that its 2015 ending inventory was understated

> Richardson Supply’s $3.9 million cost of inventory at the end of last year was understated by $1.2 million. 1. Was last year’s reported gross profit of $2.9 million overstated, understated, or correct? What was the correct amount of gross profit last ye

> Determine whether each of the following actions in buying, selling, and accounting for inventories is ethical or unethical. Give your reason for each answer. 1. In applying the lower-of-cost-or-market rule to inventories, Blue Mountain Coffee Company re

> Metro Technology began the year with inventory of $299,000 and purchased $1,820,000 of goods during the year. Sales for the year are $3,887,500, and Metro Technology’s gross profit percentage is 60% of sales. Compute Metro Technology’s estimated cost of e

> Spritzer Company made sales of $24,000 million during 2016. Cost of goods sold for the year totaled $11,040 million. At the end of 2015, Spritzer’s inventory stood at $1,000 million, and Spritzer ended 2016 with inventory of $1,400 million. Compute Sprit

> It is December 31, the end of the year, and the controller of Saxton Corporation is applying the lower-of-cost-or-market (LCM) rule to inventories. Before any year-end adjustments, Saxton reports the following data: Saxton determines that the current r

> This exercise tests your understanding of the four inventory methods. List the name of the inventory method that best fits the description. Assume that the cost of inventory is rising. 1. Results in an old measure of the cost of endi

> Cozelle, Inc., purchased inventory costing $125,000 and sold 80% of the goods for $200,000. All purchases and sales were on account. Cozelle later collected 25% of the accounts receivable. Assume that sales returns are nonexistent. 1. Journalize these t

> As a recent college graduate, you land your first job in the customer collections department of Silktown Publishing. Alicia Donovan, the manager, asked you to propose a system to ensure that cash received from customers by mail is handled properly. Draft

> Perform the following accounting for the receivables of Bronson and Moore, a law firm, at December 31, 2016. Requirements 1. Set up T-accounts for Cash, Accounts Receivable, and Service Revenue. Start with the beginning balances as follows: Cash $27,00

> On April 3, Parker Company sold $5,000 of merchandise to Wheeler Corporation, terms 2∕10, n∕30, FOB shipping point. Parker Company’s cost of sales for this merchandise was $4,000. The merchandise left Parker Company’s facility on April 4 and arrived at W

> In August, Landeau Designs sold $500,000 of merchandise; all sales were in cash. The cost of sales for August was $320,000. Based on past experience, Landeau uses an estimated refund rate of 4% of sales. Record the journal entries for the monthly sales,

> Costello Company purchases inventory from Terry Pool Supplies on June 1. The sales terms on the invoice from Terry Pool Supplies are 4∕20, net 30. What does this mean? What is Costello’s potential savings, if any? How much time does the company have to t

> On December 23, 2016, Robertson Sports Manufacturing sells a truckload of sporting goods to the Sports R Us store in Columbus, Ohio. The terms of the sale are FOB destination. The truck runs into bad weather on the way to Columbus and doesn’t arrive unti

> Barfield Investments purchased Melnick Corp. shares as a trading security on December 16 for $109,000. 1. Suppose the Melnick Corp. shares decreased in value to $92,000 at December 31. Make the Barfield journal entry to adjust the Investment in Trading S

> Slocomb Corp. holds a portfolio of trading securities. Suppose that on January 15, Slocomb paid $80,000 for an investment in Turok Co. shares to add to its portfolio. At October 31, the market value of Turok Co. shares is $97,000. For this situation, sho

> Answer these questions about receivables and uncollectibles. For the true-false questions, explain any answers that turn out to be false. 1. True or false? Credit sales increase receivables. Collections and write-offs decrease receivables. 2. True or f

> Highland Products reported the following amounts in its 2017 financial statements. The 2016 amounts are given for comparison. Requirements 1. Compute Highland’s quick (acid-test) ratio at the end of 2017. Round to two

> Collins Woodworking accepts credit cards at its store. Collins’ credit card processor charges a fee of 3% of the total amount of any credit sale. Assume that Russell Knight purchases $8,000 of custom furniture and pays with a VISA card. Make the entry th

> On August 31, 2016, Diane Fields borrowed $4,000 from Ferris State Bank. Fields signed a note payable, promising to pay the bank principal plus interest on August 31, 2017. The interest rate on the note is 9%. The accounting year of Ferris State Bank end

> 1. Compute the amount of interest during 2016, 2017, and 2018 for the following note receivable: On May 31, 2016, Charter Bank lent $220,000 to Laurie Walker on a two-year, 10% note. 2. Which party has a (an) a. note receivable? b. note payable? c.

> At the end of the current year (before adjusting entries), Holliday Corporation had a balance of $75,000 in Accounts Receivable and a credit balance of $4,000 in Allowance for Uncollectible Accounts. Service revenue (all on credit) for the year totaled $

> During its first year of operations, Old Tyme Furniture Restoration, Inc., had sales of $461,000, all on account. Industry experience suggests that Old Tyme’s uncollectibles will amount to 4% of credit sales. At December 31, 2016, accounts receivable tota

> Answer these questions about investments. 1. What is the amount to report on the balance sheet for a trading security? 2. Why is a trading security always a current asset? Explain.

> The Cash account of Rampart Corp. reported a balance of $3,530 at August 31, 2016. Included were outstanding checks totaling $1,700 and an August 31 deposit of $400 that did not appear on the bank statement. The bank statement, which came from Park State

> Cardinal Company requires that all documents supporting a check be canceled by punching a hole through the packet. Why is this practice required? What might happen if it were not?

> Cash may be a small item on the financial statements. Nevertheless, internal control over cash is very important. Why is this true?

> Identify the other control procedures usually found in a company’s system of internal control besides separation of duties, and tell why each is important.

> Explain why separation of duties is often described as the cornerstone of internal control for safeguarding assets. Describe what can happen if the same person has custody of an asset and also accounts for the asset.

> List the components of internal control. Briefly describe each component.

> Dorthea Alston, an accountant for Fun Tymes Limited, discovers that her supervisor, Eli Golden, made several errors last year. Overall, the errors overstated the company’s net income by 20%. It is not clear whether the errors were deliberate or accidenta

> Describe the types of assets that are typically included under the heading “cash and cash equivalents” on the balance sheet. What is a “cash equivalent”?

> Kent Market (KM) is a major food cooperative. Suppose KM begins 2017 with cash of $5 million. KM estimates cash receipts during 2017 will total $103 million. Planned payments will total $93 million. To meet daily cash needs next year, KM must maintain a

> Answer the following questions about internal control over cash payments: 1. Payment by check carries three controls over cash. What are they? 2. Suppose a purchasing agent receives the goods that he purchases and also approves payment for the goods. H

> Victor Albert sells memberships to the Orlando Symphony Association in Orlando. The symphony’s procedure requires Albert to write a patron receipt for all memberships sold. The receipt forms are pre-numbered. Albert is having personal financial problems,

> Claire Hunter manages Sunshine Manufacturing. Hunter fears that a trusted employee has been stealing from the company. This employee receives cash from clients and also prepares the monthly bank reconciliation. To check up on the employee, Hunter prepare

> After preparing Rampart Corp.’s bank reconciliation in Short Exercise 4-9, make the company’s journal entries for transactions that arise from the bank reconciliation. Date each transaction August 31, 2016, and include an explanation with each entry.

> Define “fraud.” List and briefly discuss the three major components of the fraud triangle.

> During 2016, Quanta Airlines paid salary expense of $41.2 million. At December 31, 2016, Quanta accrued salary expense of $2.4 million. Quanta then paid $2.6 million to its employees on January 3, 2017, the company’s next payday after the end of the 2016

> Suppose that on January 1 Coddington Travel Company paid cash of $30,000 for equipment that is expected to remain useful for five years. At the end of five years, the equipment’s value is expected to be zero. 1. Make journal entries to record a. purcha

> Answer the following questions about prepaid expenses: a. On July 1, Davis Tree Service prepaid $12,000 for six months’ rent. Give the adjusting entry to record rent expense at July 31. Include the date of the entry and an explanation. Then post all amo

> Identify the accounting concept or principle that gives the most direction on how to account for each of the following situations: a. Salary expense of $48,000 is accrued at the end of the period to measure income properly. b. March has been a particul

> Write a short paragraph in your own words to explain the concept of depreciation as used in accounting.

> A large auto manufacturer sells large fleets of vehicles to auto rental companies, such as Budget and Hertz. Suppose Budget is negotiating with the auto manufacturer to purchase 827 vehicles. Write a short paragraph to explain to the auto manufacturer wh

> As the controller of Newton Consulting, you have hired a new employee, whom you must train. She objects to making an adjusting entry for accrued salaries at the end of the period. She reasons, “We will pay the salaries soon. Why not wait until payment to

> Riverside Corporation began 2016 owing notes payable of $3.5 million. During 2016, Riverside borrowed $1.7 million on notes payable and paid off $1.6 million of notes payable from prior years. Interest expense for the year was $0.4 million, including $0.

> Refer to the Tree City Sporting Goods Company data in Short Exercise 3-17. At July 31, 2016, Tree City Sporting Goods Company’s current ratio was 1.90 (rounded) and its debt ratio was 0.45 (rounded). Compute Tree City’

> Tree City Sporting Goods reported the following data at July 31, 2016, with amounts adapted in thousands: 1. Compute Tree City’s net working capital. 2. Compute Tree City’s current ratio. Round to two decimal plac

> Use the Tree City Sporting Goods Company data in Short Exercise 3-15 to make the company’s closing entries at July 31, 2016. Then set up a T-account for Retained Earnings and post to that account. Compare Retained Earningsâ€&

> Suppose Tree City Sporting Goods Company reported the following data at July 31, 2016, with amounts in thousands: Use these data to prepare Tree City Sporting Goods Company’s single-step income statement for the year ended July 31, 20

> Gerbig, Inc., collects cash from customers in advance and from other customers after the sale. Journalize the following transactions for Gerbig: a. Accrued revenue. Some customers pay Gerbig after Gerbig has performed service for the customer. During 20

> Due to the terms of its lease, Peachtree Services, Inc., pays the rent for its new office space in one annual payment of $24,000 on August 1, 2016. The lease covers the period of August 1, 2016, through July 31, 2017. Peachtree Services has a year-end of

> Write a paragraph to explain why unearned revenues are liabilities instead of revenues. In your explanation, use the following actual example: The New York Times, a national newspaper, collects cash from subscribers in advance and later provides news con

> Return to the situation in Short Exercise 3-10. Here you are accounting for the same transactions on the books of First State Bank, which lent the money to Laziza Restaurant. 1. Make First State Bank’s adjusting entry to accrue monthly interest revenue

> Laziza Restaurant borrowed $80,000 on October 1 by signing a note payable to First State Bank. The interest expense for each month is $433. The loan agreement requires Laziza to pay interest on January 2 for October, November, and December. 1. Make Lazi

> Carter Corporation made sales of $900 million during 2016. Of this amount, Carter collected cash for $871 million. The company’s cost of goods sold was $280 million, and all other expenses for the year totaled $325 million. Also during 2016, Carter paid

> Gloria Varay, MD, opened a medical practice. The business completed the following transactions: After these transactions, how much cash does the business have to work with? Use a T-account to show your answer. July 1 Varay invested $29,000 cash to

> Seventh Investments, Inc., began by issuing common stock for cash of $250,000. The company immediately purchased computer equipment on account for $106,000. 1. Set up the following T-accounts of Seventh Investments, Inc.: Cash, Computer Equipment, Accou

> Greene’s Catering began with cash of $17,000. Greene then bought supplies for $2,200 on account. Separately, Greene paid $4,600 for equipment. Answer these questions. a. How much in total assets does Greene have? b. How much in liabilities does Greene

> Fill out the following chart to show the impact on the accounting equation from each transaction. Liabilities Increase Decrease Increase Decrease Increase Stockholders' equity Decrease Assets Description Jan 2 Purchased office supplies on account fo

> LeVon Fashions specializes in imported clothing. During March, LeVon completed a series of transactions. For each of the following items, give an example of a transaction that has the described effect on the accounting equation of LeVon Fashions. a. Inc

> Carey Anderson opened a software consulting firm that immediately paid $21,000 for a computer system. Was Anderson’s computer system an expense of the business? If not, explain.

> Accounting has its own vocabulary and basic relationships. Match the accounting terms at the left with the corresponding definition or meaning at the right. 1. Debit 2. Еxpense 3. Net income 4. Ledger 5. Posting 6. Normal balance 7. Р

> For each of the following accounts, identify whether that item is an asset, liability, or equity account. a. Accounts payable b. Sales revenue c. Cash d. Bonds payable e. Common stock f. Accounts receivable g. Equipment h. Salaries payable i. In

> Refer to Yellowberry, Inc.’s, trial balance in Short Exercise 2-15. The purpose of this exercise is to help you learn how to correct three common accounting errors. Error 1. Slide. Suppose the trial balance lists Land as $4,800 instead

> Yellowberry, Inc.’s, trial balance follows: Compute these amounts for the business: 1. Total assets 2. Total liabilities 3. Net income or net loss during December A1 D Yellowberry, Inc. Trial Balance December 31, 2016 1 Balance

> Assume that Navy Port Company reported the following summarized data at December 31, 2016. Accounts appear in no particular order; dollar amounts are in millions. Prepare the trial balance of Navy Port Company at December 31, 2016. List the accounts in

> Journalize the following transactions. Include dates and a brief explanation for each journal entry. July 1: Issued common stock for $10,000 July 5: Sold services on account for $5,000 July 9: Purchased office supplies on account for $500 July 10: So

> Borland Consulting performed service for a client who could not pay immediately. Borland expected to collect the $4,900 the following month. A month later, Borland received $2,300 cash from the client. 1. Record the two transactions on the books of Borl

> Consultant Dina Delorme purchased supplies on account for $5,200. Later Delorme paid $1,750 on account. 1. Journalize the two transactions on the books of Dina Delorme, Consultant. Include an explanation for each transaction. 2. Open a T-account for Ac

> After operating for several months, architect Mark Meecham completed the following transactions during the latter part of January: Journalize the transactions of Mark Meecham, Architect. Include an explanation with each journal entry. Borrowed $31,

> For each of the following items, indicate whether or not that item would be considered to be a transaction at Highpoint Lawn Maintenance. a. Highpoint Lawn Maintenance files its articles of incorporation with the state. b. Highpoint Lawn Maintenance acq

> Good business and accounting practices require the exercise of good judgment. How should ethics be incorporated into making accounting judgments? Why is ethics important?

> Following are partially completed financial statements (income statement, statement of retained earnings, and balance sheet) for Masterton Corporation. Complete the financial statements. All amounts are in millions. A1

> Avalon Legal Services, Inc., ended 2015 with cash of $18,000. During 2016, Avalon earned net income of $105,000 and had adjustments to reconcile net income to net cash provided by operations totaling $10,000 (this is a negative amount). Avalon paid $32,0

> Harmon Corporation ended its fiscal year on September 30, 2016, with cash of $75 million, accounts receivable of $22 million, property and equipment of $28 million, and other long-term assets of $17 million. The company’s liabilities consist of accounts p

> At December 31, 2016, Aloha Enterprises has cash of $50 million, accounts receivable of $19 million, and long-term assets of $39 million. The company owes accounts payable of $13 million and has a long-term note payable of $25 million. Aloha Enterprises

> Roam Corporation began 2016 with retained earnings of $230 million. Revenues during the year were $490 million, and expenses totaled $340 million. Roam declared dividends of $54 million. What was the company’s ending balance of retained earnings? To answ

> O’Conner Services, Inc., began 2016 with total assets of $235 million and ended 2016 with assets of $355 million. During 2016, O’Conner Services earned revenues of $397 million and had expenses of $164 million. O’Conner Services paid dividends of $29 mil

> For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of ca

> Apply your understanding of the relationships among the financial statements to answer these questions. a. How can a business earn large profits but have a small balance of retained earnings? b. Give two reasons why a business can have a steady stream of